Legal Practice Continuity: What You Should Consider
In the setting of a sole proprietorship or small-sized firm where the key responsibilities lie on just one principal lawyer, what happens to the law practice, its employees and clients when the principal lawyer is unwell or incapacitated, or loses mental capacity, or suddenly passes away (hereinafter referred to collectively as the Unforeseen Situations)? How can the principal lawyer ensure if or when that day comes, the moneys, outstanding matters, files, employees and clients are taken care of and properly accounted for?
A. Possible Scenarios
Sole practitioners and principal lawyers running small outfits where they are the sole decision makers and/or only lawyers handling the firm’s administration and accounts (collectively, Sole Principal Lawyers) are encouraged to have a succession plan and keep continuity in mind when making day-to-day decisions. Some possible scenarios that may arise when a Sole Principal Lawyer faces an Unforeseen Situation are:
- If the client and/or conveyancing account(s) is restricted to allow only the Sole Principal Lawyer to effect withdrawals or for only the Sole Principal Lawyer to be one of the signatories, the firm would not be able to make withdrawals from the accounts.
- Where there is no legal manager appointed, the remaining support staff and/or family members of the Sole Principal Lawyer may have to step in to assist the Sole Principal Lawyer. However, the Sole Principal Lawyer’s support staff and/or family members may not know what the proper steps to be taken are.
B. What Can Sole Principal Lawyers Do to Ensure the Smooth Running of Their Practice?
In view of the above, Sole Principal Lawyers should consider setting up the following to ensure the smooth running of their practice in the event of an Unforeseen Situation: –
(a) Making a Will
Sole Principal Lawyers should make a will to facilitate the continuation and disposal of their law practice. The will should include clear instructions for the executor(s) to appoint a practising solicitor as a legal manager to carry on the practice pending its disposal. Arrangements for remuneration of the appointed legal manager is a matter between him/her and the estate.
Although it is not necessary for a solicitor to be appointed as the executor or one of the executors, this would certainly facilitate the conduct of the practice upon the passing of the Sole Principal Lawyer.
Paragraphs 8 to 14 of the Law Society’s Practice Direction 3.7.2 (Sole Practitioners – Arrangements for Continuance of Practice) provides detailed guidance on the arrangements to be made to facilitate the conduct of the practice upon the Sole Principal Lawyer’s passing.
(b) Appointing a Practice Pal
In February 2019, the Law Society launched the ”Practice Pal” scheme to serve as:
- an interim measure to facilitate the smooth running of a practice when a Sole Principal Lawyer is unable to attend to his or her practice and clients in an Unforeseen Situation; and
- a ”buddy system” for Sole Principal Lawyers if they face issues at work (e.g. threatening behaviour by disgruntled or former clients).
The main role of the Practice Pal is to assist gratis as an informal manager where the Sole Principal Lawyer has not nominated a solicitor to take over the management of the firm.
Generally, a Practice Pal can help to manage the Sole Principal Lawyer’s practice or attend upcoming court hearing(s) on the practitioner’s behalf. In cases of bereavement and where there is no alternate lawyer in the firm, the Sole Principal Lawyer’s legal personal representative may seek assistance from the Practice Pal to take immediate steps to ensure the smooth running of the day-to-day matters of the practice and that current files of clients are attended to, until the legal personal representative appoints a legal manager.
To register a Practice Pal, please e-mail the Compliance department of the Law Society at [email protected]. The Law Society will keep a record of the Practice Pals’ names in a repository, and call upon a designated Practice Pal if the need arises.
(c) Establishing Formalised Legal Fee Arrangements
In the event the Practice Pal is to take over as counsel, formal legal fee arrangements should be established and appropriate notice should be given to clients. The fee arrangements for the Practice Pal should be mutually agreed upon with the client. It is recommended to include a fee arrangement clause as set out below in the Letter of Engagement for clarity and transparency:
Engagement of alternate lawyer
- As I am the sole practitioner in [name of law practice] , the law practice will engage another lawyer (‘alternate lawyer’) to help administer and manage the practice in the event that I am indisposed due to illness, accident or other reasons. This is to ensure that the law practice’s duties to clients and others are met.
- The alternate lawyer will be Mr / Ms / Mrs ____, who practises in [name of his/her law practice].
- During the period that I am indisposed, the alternate lawyer’s responsibilities will include mentioning cases on behalf of the law practice or applying to adjourn cases fixed for hearing.
- The alternate lawyer will observe the confidentiality of all client matters.
- The alternate lawyer may charge a fee that is fair and reasonable for carrying out his/her responsibilities relating to your matter.
(d) Notifying the Practice’s Bank
Sole Principal Lawyers should make prior arrangements with the practice’s bank to allow other lawyers in the firm or a cover practitioner to operate the firm’s client and office accounts in specific circumstances. This would avoid the interruption of clients’ business where an Unforeseen Situation lasts for an extended period of time. Please refer to paragraph 5 of Practice Direction 3.7.2 (Sole Practitioners – Arrangements for Continuance of Practice) for details.
(e) Keeping an Updated List of Files
Sole Principal Lawyers should keep a list of all active files1See section 8.6.3 of the Law Society’s Practice Management Guide for details. (i.e. files which have not been closed) for which they are responsible, with details of:
- The estimated value of the matter (as previously informed by the lawyer during the file opening process);
- The fees billed to date; and
- The work in progress.
Preparing for the unexpected is a responsibility that all lawyers, especially Sole Principal Lawyers, must shoulder. Safeguarding your practice against the Unforeseen Situations serves as a testament of your dedication to your clients and support staff. By taking the proactive steps outlined in this article, you are also helping your loved ones to be in a better position to ensure the continuity of your practice and to navigate through difficult times.